A common misconception among expanding e-commerce businesses is, “Why would I ever focus on wholesale? I make more money on e-commerce.” While there are numerous reasons to focus on channel diversification, below is an example of how that is an easy misconception to make.
In the margin analysis you can see the CEO’s point in the first two lines that if you sell $100,000 of product, wholesalers immediately take at least a 50% chunk of that.
Where the CEO is often misled though, is not considering all of the other costs of ecommerce. With many of our clients, once you apply discounts, returns, higher shipping costs, and ad spend, you actually make more margin to cover overhead with wholesale than e-commerce.